Insurance Act

What it does: Sets out statutory conditions and other requirements for most types of insurance contracts – life, property and casualty, accident and sickness, group – except auto, which is covered by other statutes.

What’s new: The whole act could be new very shortly (we hope). It has been under revision for a couple of years now, and IBABC has been urging the Ministry of Finance to table the new bill in the spring 2008 session; to delay any further runs the risk of the bill not being tabled until 2010 – after the ’09 provincial election.

At issue: Among the things we may see in the new act (based on the discussion paper issued by government in the 2007 consultation round): limitation period harmonized with the new Limitation Act (two years from date of loss); insurability of innocent co-insureds, provision for dispute resolution; consistency applied to how fire and multi-peril risks are handled including “fire-following” issues related to vacancy and earthquake, and revisions to the Statutory Conditions.

Broker relevance: Every P&C policy other than auto that brokers issue must comply with this act, so policy wordings may change.

Financial Institutions Act

What it does: Governs all provincially regulated financial institutions including trust companies, insurance companies and credit unions. It also provides the licensing and regulatory framework for insurance agents, salespersons and adjusters under the supervision of the Insurance Council of B.C. The FIA was updated in 2004.

At issue: First, disclosure of such information as how the broker/agent is remunerated or potential conflicts of interest. For the past few years, each province has, according to its own timetable, reviewed what the appropriate level of disclosure should be for insurance intermediaries, and then implemented regulations or voluntary standards for that disclosure. By and large, the new disclosure practices adopted by other provinces have brought them closer to what B.C. already has in place. The B.C. disclosure requirements that were in section 90 of the old FIA remain, but have been moved to regulations.

Next, rebating. The FIA regs allow for rebating to a maximum of 25% of the premium. IBABC opposed this regulation and would still like to see it rescinded.

Broker relevance: While the entire FIA is relevant to brokers, its mandate to the Insurance Council of B.C. and the rule-making authority it gives the Council are particularly important. Licensee conduct is guided by the Council’s Licensee Handbook and the Code of Conduct.

Bank Act

What it does: The federal Bank Act regulates the market conduct of the financial services sector. Generally speaking, provincial legislation harmonizes with it on such points as coercive tied selling (which is prohibited). The act makes provisions for a review every five years.

What’s noteworthy: The last periodic review turned out to be a long-drawn-out process due to changes in government, but it finally concluded in 2006 with the passing of Bill C-37, which maintained the status quo on continuing the prohibition on banks selling insurance in their branches.

At issue: Certain banks have been making available in their retail branches pamphlets promoting insurance products offered by the insurance companies owned by the banks. Bank tellers have been known to provide information regarding insurance products. Bank websites provide a direct link to the websites of bank-owned insurance companies. These actions contravene section 416 of the Bank Act. TheInsurance Brokers Association of Canada (IBAC) has pointed out to the federal government that banks are not following the current rules, and yet they continue to ask for more powers.

Broker relevance: The federal Bank Act maintains insurance as a financial pillar separate from other financial products so that its integrity and function of indemnification against pure risk can be maintained. In real terms this means that banks are prohibited from selling insurance directly from their branches. Banks can own insurance subsidiaries that must adhere to the same licensing requirements, codes of conduct and privacy regulations as privately owned insurance brokerages. In this way inducements and marketing mechanisms like bundling and rebating that could lead to customers agreeing to less-than-adequate coverage are kept within allowable limits.

Vehicle legislation

What it does: The Insurance Corporation Act establishes and provides an operating mandate for the Insurance Corporation of B.C. (ICBC). Amending legislation in 2003 appointed the B.C. Utilities Commission as the regulator responsible for setting ICBC’s basic insurance premiums and for ensuring there is no cross-subsidization between ICBC’s basic and optional operations. The Motor Vehicle Act covers how motor vehicles and drivers must be licensed and how vehicles are to be operated. Many of an Autoplan broker’s daily tasks involving license plates, vehicle registration, AirCare are dictated by this act.

The Insurance (Vehicle) Act, created by Bill 93 in 2003, replaces the previous Insurance (Motor Vehicle) Act. Bill 93 consolidated auto-related sections from other statutes and brought both the basic insurance provided by ICBC and the optional coverage provided by ICBC and private insurers into one act. The Bill 93 requirement for ICBC to issue separate policies came into effect June ’07.

At issue: In what was probably an inadvertent error, section 69 of the Insurance (Vehicle) Act prohibits persons (including brokers) from acting as the agent of an applicant for an optional insurance contract. This has caused a great deal of inconvenience for fleet owner/operators who had previously filed letters of authority with their brokers so that they could relay instructions for coverage changes without attending in person. IBABC is still trying to get this corrected.

Broker relevance: Bill 93 also maintained the all-important section (moved to the Insurance Corporation Act) that stipulates only licensed agents can be appointed as ICBC agents, and that agency contracts can only be cancelled for just cause.

For information on the above: Trudy Lancelyn, IBABC, 604-606-8008, or click here.